The three sequels will be filmed simultaneously beginning in 2014, and will be released respectively in December 2016, 2017 and 2018.
The 2009 3D film is the highest grossing movie of all time.
It told the story of a paraplegic soldier sent to the alien planet of Pandora.
“In writing the new films, I’ve come to realize that Avatar’s world, story and characters have become even richer than I anticipated,” James Cameron said in a statement.
“It became apparent that two films would not be enough to capture everything I wanted to put on screen,” he continued.
While James Cameron wrote the original film, four screenwriters have been signed up to work with him on the sequels.
They are Josh Friedman, who wrote War of the Worlds; Rick Jaffa and Amanda Silver, who wrote Dawn of the Planet of the Apes and Shane Salerno who scripted Armageddon.
Jim Gianopulos, head of Fox Films, said that everyone at the studio had “no higher priority, and can feel no greater joy, than enabling Jim to continue and expand his vision of the world of Avatar”.
In 2010, James Cameron said that there would be two sequels that would feature “self-contained stories that also fulfill a greater story arc”.
“We will not back off the throttle of Avatar’s visual and emotional horse-power,” he said.
Last year, Sigourney Weaver said she will appear in the sequel, despite her character dying in the first installment.
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